Yen slides further to hit 10-month low

London

THE Japanese yen fell to a 10-month low on Thursday, extending its previous day's slide that saw the currency breach a key technical level against a broadly strengthening US dollar.

A run of dire economic news out of Japan has stirred talk that the country is already in recession, and that Japanese funds were dumping local assets in favour of US shares and gold.

Improving risk appetite in global markets has also hit the yen, which usually tends to benefit in times of market stress.

China reported a drop in new Covid-19 infections on Thursday, but scientists warned the pathogen may spread more easily than previously believed, as two elderly passengers from a ship quarantined in Tokyo became the latest to die.

China also cut its benchmark lending rate on Thursday, as widely expected, with the authorities moving to lower financing costs for businesses.

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There is a combination of factors for the yen weakness - a broader strengthening of the US dollar on the back of the novel coronavirus which is making the dollar more attractive across the board, said Lee Hardman, currency strategist at MUFG in London.

"To a degree, it was a catch-up move," he added.

He also noted a pickup in purchases of foreign bonds and equities by Japanese investors during dips in the yen in recent weeks.

The yen fell further to 111.84 to the dollar, its lowest since April 2017. On Thursday, it smashed a key technical barrier of around 110.30 that had held firm since last May.

The euro was 0.1 per cent lower at US$1.079.

The dollar also rose 0.3 per cent on the Chinese yuan to 7.0215, and the Australian dollar sank to 11-year lows at $0.6630.

Against a basket of peers, the greenback hit its highest since May 2017 and is now up over 3.5 per cent this year.

"The critical thing to understand is the yen weakness is not so much "risk on" as it is Japanese asset managers heading for the Tokyo market exit in droves," said Stephen Innes, Asia Pacific market strategist at AxiCorp.

"With the USD inflow unyielding, it's unclear what could stem this tide other than US administration talking down the dollar," he added

US President Donald Trump has long protested that the dollar was too strong and unfairly penalising US business. REUTERS